Lesson 6 of 7
The 2020 crash and rebound
A fall and a recovery both arrived inside one calendar year that finished up 18.4 percent, hiding the swing from a reader who only sees the annual number.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
Who writes thisEditorial processLinkedIn (opens in a new tab)X (opens in a new tab)
In one minute
- Shares fell over a few weeks and then recovered within the same calendar year, which finished up 18.4 percent with dividends.
- A single annual figure can hide a large fall and rebound that both happened inside it.
- Whether a holder is forced to sell during a fall, rather than how long they have owned the stock, decides who is still holding when it recovers.
The 2020 crash was a fall measured in weeks rather than years, followed by a recovery inside the same twelve months, and the full calendar year finished up 18.4 percent once dividends are counted in. The trigger was the COVID-19 pandemic. In February and March 2020 governments shut large parts of the economy, and nobody could forecast for how long.
A fall and a full recovery in one year
- 201931.5%
- 2020 · fell and recovered within the year18.4%
- 202128.7%
- 2022−18.1%
A fall measured in weeks, not years
1929 took three years, 1973-74 two, 2000-02 three and 2008 one calendar year of losses. 1987 was a single day inside a rising year. In 2020 the fall and the recovery both sit inside one calendar year.
What one calendar year hides
An 18.4 percent gain for the year says the market ended higher than it started. It says nothing about the path in between, and here the path included a sharp fall followed by a rise that more than reversed it. A reader who only ever sees annual figures can miss that a year holding both a large loss and a large gain still reads, at year end, as an ordinary positive year. 2022's fall of 18.1 percent, larger than 2020's full-year result, came with no single crash day to name, which is the opposite case: a bad year with no headline moment inside it.
Who is forced to sell
Not every holder who sold during the fall chose to. A margin loan that must be topped up, a redemption an investor owes their own clients, a bill that has to be paid this month: each can force a sale at whatever price is on offer. It does not matter what the holder believes the business is worth. Someone under no such pressure can simply wait, and 2020 rewarded whoever was able to.
Forecasting in real time
At the bottom of the fall, nobody holding shares knew in advance that a recovery inside the same year was coming. The lesson is not that holding is always right; a business whose numbers actually broke would not have earned that recovery. It is that the decision to sell or hold is best tested against the business's own numbers, not against a forecast of where the price goes next.
Check yourself
What does the 18.4 percent full-year 2020 figure hide?
- Nothing; the year moved smoothly to that result
- A sharp fall and a rebound that both happened within the same year
- A loss that was larger than the number shown
Show the answer
Answer: B.
The annual figure nets out everything that happened during the year, including a large fall and an even larger rebound, neither of which is visible in the single number.In the worked example, why did the investor who sold and bought back end up with less than the one who held?
- They paid a transaction fee that was not disclosed
- They bought back fewer units than they sold, because the price had already risen before they re-entered
- The market never actually recovered
Show the answer
Answer: B.
Selling at 65 and buying back at 100 converts the same cash into fewer units than were sold, so even a further rise in price is applied to a smaller position.What is one thing that decides whether a holder is forced to sell during a fall?
- How long they have already held the stock
- Whether they used borrowed money, or need the cash on a schedule they do not control
- Which sector the stock belongs to
Show the answer
Answer: B.
A margin call or a redemption owed to someone else can force a sale regardless of what the holder believes the business is worth. Length of ownership does not decide that.Sources
- Berkshire Hathaway 2025 annual report, table "Berkshire's Performance vs. the S&P 500": S&P 500 with dividends, by calendar year, 1965 to 2025.
What this leaves out
- Annual figures only; the size of the fall inside 2020 is not shown.
- The buy-and-sell example uses round, invented prices to show the arithmetic and is not a record of any real fund or investor.
- Nothing here is advice about when to sell or when to buy any security.